Chronicles the experience of Lucchetti, a Quinenco subsidiary, as it expanded from its historically strong domestic stronghold into Peru. Lucchetti, a pasta company, had grown to the point where there was no room to expand in the Chilean market. The Peruvian market, however, looked extremely promising. Thus, in 1996, Lucchetti Peru was born. By late 2003, however, the new state-of-the-art pasta plant was being liquidated. The management of the company was considering whether Lucchetti should leave the Peruvian market altogether and absorb a $150 million write-off or, alternatively, to continue and build a new plant to take advantage of what was left of the Lucchetti market share, despite the considerable additional investment required. Had this been a case of a good strategy plagued by Murphy's Law? Was there something they should have known or some point where the team members had made the wrong decision? The lesson to be gleaned from this failed Peruvian venture remained unclear, but they wanted to apply those lessons to future domestic and international expansion ventures.
Authors :: U. Srinivasa Rangan, Ed Cale, David Wylie
Swot Analysis of "Lucchetti" written by U. Srinivasa Rangan, Ed Cale, David Wylie includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lucchetti Peruvian facing as an external strategic factors. Some of the topics covered in Lucchetti case study are - Strategic Management Strategies, International business and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Lucchetti casestudy better are - – there is increasing trade war between United States & China, central banks are concerned over increasing inflation, wage bills are increasing, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies,
talent flight as more people leaving formal jobs, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lucchetti case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lucchetti Peruvian, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lucchetti Peruvian operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Lucchetti can be done for the following purposes –
1. Strategic planning using facts provided in Lucchetti case study
2. Improving business portfolio management of Lucchetti Peruvian
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lucchetti Peruvian
Strengths Lucchetti | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lucchetti Peruvian in Lucchetti Harvard Business Review case study are -
Learning organization
- Lucchetti Peruvian is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lucchetti Peruvian is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lucchetti Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Lucchetti Peruvian is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Lucchetti Peruvian in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Lucchetti Peruvian has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lucchetti Peruvian to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Lucchetti Peruvian has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lucchetti Peruvian has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the Lucchetti Peruvian are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Lucchetti Peruvian is one of the most innovative firm in sector. Manager in Lucchetti Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Lucchetti Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Effective Research and Development (R&D)
– Lucchetti Peruvian has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Lucchetti - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Lucchetti Peruvian has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Lucchetti HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Lucchetti Peruvian has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lucchetti Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– Lucchetti Peruvian is one of the leading recruiters in the industry. Managers in the Lucchetti are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Lucchetti | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lucchetti are -
High cash cycle compare to competitors
Lucchetti Peruvian has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Lucchetti Peruvian products
– To increase the profitability and margins on the products, Lucchetti Peruvian needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Lucchetti Peruvian has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the segment, Lucchetti Peruvian needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Lucchetti HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Lucchetti Peruvian has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lucchetti, in the dynamic environment Lucchetti Peruvian has struggled to respond to the nimble upstart competition. Lucchetti Peruvian has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lucchetti, is just above the industry average. Lucchetti Peruvian needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study Lucchetti has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lucchetti Peruvian 's lucrative customers.
Need for greater diversity
– Lucchetti Peruvian has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Lucchetti Peruvian has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Lucchetti Peruvian has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities Lucchetti | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Lucchetti are -
Loyalty marketing
– Lucchetti Peruvian has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lucchetti Peruvian can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lucchetti Peruvian is facing challenges because of the dominance of functional experts in the organization. Lucchetti case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lucchetti Peruvian can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Lucchetti, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Lucchetti Peruvian to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lucchetti Peruvian in the consumer business. Now Lucchetti Peruvian can target international markets with far fewer capital restrictions requirements than the existing system.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lucchetti Peruvian can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Lucchetti Peruvian has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Lucchetti - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lucchetti Peruvian to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Lucchetti Peruvian to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Lucchetti Peruvian can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Leveraging digital technologies
– Lucchetti Peruvian can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lucchetti Peruvian to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lucchetti Peruvian to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Lucchetti Peruvian can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Lucchetti External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lucchetti are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lucchetti Peruvian with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lucchetti Peruvian can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Lucchetti .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lucchetti, Lucchetti Peruvian may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lucchetti Peruvian needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lucchetti Peruvian.
Environmental challenges
– Lucchetti Peruvian needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lucchetti Peruvian can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lucchetti Peruvian business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Lucchetti Peruvian needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
High dependence on third party suppliers
– Lucchetti Peruvian high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lucchetti Peruvian in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Lucchetti Peruvian demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lucchetti Peruvian in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Lucchetti Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Lucchetti needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Lucchetti is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Lucchetti is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Lucchetti is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lucchetti Peruvian needs to make to build a sustainable competitive advantage.